Aviva PLC to cut 16 divisions

In an effort to increase capital reserves, Aviva PLC announced this morning it will cut 16 of its non-core divisions, according to Bloomberg.

Aviva USA announced this morning that it will not comment its parent company's plans to restructuring.

There was no mention of West Des Moines-based Aviva USA in a statement released today by Aviva PLC.

Chris Littlefield, president and CEO of Aviva USA, released the following statement:

"Today, our parent company Aviva plc announced progress on the ongoing strategic review of each of its 58 business units. While some of Aviva plc's businesses were identified in today's update, others, like Aviva USA, were not discussed. Therefore, we do not have anything new to report. While we do not comment on the speculation that accompanies this process, Aviva USA continues to be a strong and profitable business. As an industry leader in the sale of indexed life insurance and annuities, we have performed well over the last few years. For all of us at Aviva USA, it is business as usual as we continue to focus on growing our business and serving our Key Distribution Partners, agents and consumers."

The sales are in order to bring the company's capital levels to 160 to 170 percent from its current level of 140 percent, according to Bloomberg. The cuts will encompass about one third of the company's business.

In a statement to shareholders regarding a new strategic plan, CEO John McFarlane, who took over in early May, said the new plan is intended to give the business a narrow focus, build its financial strength and improve its financial performance.

The 16 non-core businesses to be cut, or businesses that are "currently producing or will prospectively produce returns below the group's required return," include the South Korean unit, small Italian partnerships and UK Large-Scale Bulk Purchase Annuities, according to a release.

"We expect the bulk of the changes to Aviva to take place over the next 12 months, but expect some to extend through to the end of 2013, which means we will see the effects of the plan next year but expect the full effect for the whole of 2014," McFarlane said in a release.

McFarlane said he met with major shareholders and considered and discussed with them concerns over Aviva's business model. He said shareholders were concerned that the business model was too complex for shareholders to understand, Aviva was too exposed to the eurozone debt crisis and had weaker levels of capital than its competitors.

He also said the company's strategy of restructuring has been inefficient in the past five years and many of the changes did not have positive results. To read McFarlane's entire statement, click here.